Nike’s Target Cut at DA Davidson, but Still a “Buy” (NKE)

Athletic footwear and apparel maker Nike, Inc. (NKE) on Wednesday caught some tepid commentary from analysts at DA Davidson.

The firm maintained its “Buy” rating on NKE but lowered its price target from $129 to $123. That new target still suggests a 25% upside to the stock’s Tuesday closing price of $98.45.

A DA Davidson analyst commented, “We expect Nike’s market leadership position and earnings growth trajectory will continue into FY13 behind running and basketball category strength, new product launches (Flyknit and Nike+ Basketball/Running), the NFL license and price-driven gross margin expansion. We suspect recent investor concerns around earnings risk will prove overdone as Nike demonstrates progress towards FY15 financial targets. Widely anticipated topline deceleration is unavoidable; delivery of gross margin expansion and strong athletic cycle to keep earnings growth story intact. Heightened economic risks, currency translation and increasingly difficult comparisons set the stage for topline deceleration. We are reiterating our BUY rating and reducing our price target from $129 to $123 based on 20x our revised CY13 EPS estimate of $6.17. We see share appreciation with earnings growth as the company executes on its global growth strategy.”

Nike shares posted modest gains in morning trading Wednesday.

The Bottom Line
Shares of Nike (NKE) have a 1.46% dividend yield, based on last night’s closing stock price of $98.45. The stock has technical support in the $95 price area. If the shares can firm up, we see overhead resistance around the $105-$108 price levels.

Nike, Inc. (NKE) is not recommended at this time, holding a DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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